Scott McNealy steps down

CEO Schwartz

Common Topics

Scott McNealy is stepping down as Sun Microsystems' CEO after 22 years at the helm. McNealy will retain the role of chairman, and described his new role as one of "chief evangelist". Jonathan Schwartz, Sun's president and Chief Operating Officer, assumes the chief executive's responsibilities. Schwartz had been tipped for the role for years, but rumors circulating last week that his hour had finally come were denied by Sun and McNealy.

McNealy who had seen former lieutenants become successful CEOs at other large technology companies including Ed Zander at Motorola and Eric Schmidt at Google, said he'd been working hard to get Schwartz into the post for a decade.

McNealy pre-empted questions of timing by saying that he didn't wish to handover until the company was stabilized after the dot.com crash, and that it had been growing too fast to think about a handover during the boom.

Schwartz joined Sun in 1996 when it acquired a small NeXT software house Lighthouse Design, and moved into strategy and M&A. He hit the spotlight in 2001 by assembling the rapid industry response to Microsoft's Passport sign-on initiative, the Liberty Alliance. Schwartz then spent two years as EVP of software.

However, Schwartz's talent for capturing the headlines - he's a Mellotron of sound bytes - has created a few hostages to fortune. A boast that Sun had captured a contract worth a billion desktops in China is so far around a billion desktops short of it target. And Schwartz's fingerprints are on the "Participation Age" campaign, a sloppy and uninspiring concept excoriated by The Economist recently, that's eaten up Sun's ad budget for the year.

McNealy's persistence and belief grew Sun from its roots as a scrappy workstation start-up into one of the last three remaining enterprise systems companies. Four years ago, McNealy told us he'd been the only vote in the room against a decision to license Microsoft Windows NT in the early 90s. Sun settled its long-running dispute with Microsoft last year.

The development of Java, and the inspired purchase of SGI's E10000 systems allowed Sun to escape the collapsing workstation market, and become the flavour of the dot com boom.

But McNealy has been honest about the missed opportunities, too. Because of its workstation focus, Sun passed up the chance to develop and market a new idea developed on its SUN workstation, for a dedicated network router. Today Cisco has a market capitalization of $124bn, eight times larger than Sun.

Wall Street had long waged war against McNealy's insistence on Sun as a vertically integrated systems company: one that produces a finished widget. Financial markets prefer to see horizontal vendors, exemplified by Wintel and Dell, because they squeeze the costs out of a business. In reality, the costs are simply transferred elsewhere, usually to the customer in the form of integration woes, shorter buying cycles, and lower reliability.

McNealy had long advocated that Sun produce its own microprocessors and systems software, and the success of Java prompted Sun to add application stacks. The recent success of Apple with its iPod, and Wintel's own problems, cast McNealy's vision in a more favorable light.

Both McNealy and Schwartz, in an interview with The Register, said Sun plans to follow a similar path under the new leadership.

"Shame on me if I need to put someone in who needs to change the direction of the company," McNealy said.

Schwartz added one item by saying, "The big thing that is not going to change is our reliance and focus upon innovation as a competitive weapon. What will change going forward is financial performance."

McNealy plans to spend the first three months of the regime switch traveling around the globe and talking to customers. The company looks to put a particular focus on Opteron-based systems, which it admits that not enough people know about at this time.

"Jonathan is actually just strapping my butt to an airplane seat for the next 90 days," McNealy said. "There is a huge story to tell here, and I know the story, and I am not bad at telling it.

"I just have to buck up and get myself geared up here to go and do a jetlag for the next couple of months.

"There is nothing more important to me than fours years from now people absolutely forgetting this whole day and just thinking, 'Wow, they never skipped a beat, and all that stuff they said was going to happen has happened.'"